KUALA LUMPUR: Negative impact on the allegation of unfair labour practices among the big four rubber glove players could provide an edge to new entrants, as they do not carry the burden of previous practices, Affin Hwang Capital (Affin Hwang) said.
The firm said allegation of unfair labour practices would no doubt have a negative impact on these companies, as some of their clients were likely to be under pressure by their stakeholders to seek new alternatives.
Kossan Rubber Industries Bhd and Hartalega Holdings Bhd have been accused by activists of unfair labour practices, similar to Top Glove Corporation Bhd, which had its products restricted from entering the US by the US Customs and Border Protection.
"We believe that due to the ruling, some of Top Glove's US and EU (European Union) customers are forced to cancel their orders due to the pressure from stakeholders.
"Apart from the rubber sector (including condom manufacturing), other sectors such as plantation and EMS (electronics manufacturing services) are also being accused of violating fair labour practices.
"We understand that the main allegation is related to the recruitment fee charged on the foreign workers, which is deemed legal by both the recruiting and receiving countries, but seen as illegal by the activists, as it would lead to debt bondage," AffiHwang said.
Affin Hwang said apart from the recruitment fee, other problems raised by the activists in general included the lack of a rest day, sub-par accommodation, excessive overtime and unpaid wages.
It said although companies are already working towards resolving the issues, the shifting of standards had also made the situation more challenging.
It added that the uncertainty on average selling price trends and the new allegations over unfair labour practices could lead capped share price upside, despite their undemanding valuations.
Affin Hwang has maintained its "neutral" call on the rubber sector.